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Payoff Plan – Complete guide, FAQs, Tips & More

Payoff Plan

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

Unsecured debts such as credit card debt can really creep up on you and become a serious problem if not kept in check. 

Nevertheless, there are several methods and processes that you can try out in order to get out of debt. 

In this post, I’ll be looking at how you can effectively pay off debt by devising a detailed debt payoff plan. 

Credit Card Debt and How it Works

While it’s true that credit cards can work as a great tool to help you fund purchases that you would not be able to afford otherwise, credit card debt can quickly spiral out of control if you’re not careful. 

Typically, the best way to stay out of credit card debt is to only use it to fund purchases that you would be able to afford with cash on hand as well. 

You need to pay off your credit card balance in order to stay out of debt on it. You can choose to pay however much money you want towards the debt on your credit card as long as it’s equal to or higher than the minimum payment. 

The minimum monthly payment is the amount of money that you are obligated to pay your credit card company every month. 

If you can only afford the minimum monthly payment, then it’s okay to pay just that amount. However, I would advise that you should always try to pay more than the minimum payment amount. 

This is because the more money you pay during your monthly payment, the quicker your debt will be paid off. As a result of this, you will pay less money in the form of interest. 

If you keep making minimum payments for a long time, then you would pay a lot of money in the form of interest rate debt overall. 

Thus, it’s always a good idea to take care of your debts as soon as possible, no matter what type of debts they are. 

Interest Rates and Credit Cards 

If you’re struggling to pay back your credit card balance, then a simple call to your credit card company can make a lot of difference. 

Try calling and explaining your situation to them. Tell them that, if needed, you can provide evidence of your financial circumstances as well. These would be in the form of copies of your bank statements and/or wage slips. 

Depending on your credit card company, they might give you a payment break or you may be able to get the interest rate on your debt repayment lowered. 

Getting your interest rate lowered by even one or two points can mean you saving hundreds of pounds every year. 

Debt Payoff: Debt Avalanche vs Debt Snowball 

Paying off your debt can be an extremely confusing task where you have trouble figuring out where to begin. 

These two methods will help you get some bearings on your debt repayments and also help build motivation for you to pay back the money you owe. 

Both of these methods would require you to listen down your debts so it’s essential that you take note of all the debts you have. 

You can account for all of your debts by going through your credit file. You can also look at old correspondence between you and your creditors as well as old bank account statements of yours. 

debt consolidation tools rate apr annual percentage consumer debt

Debt Avalanche Method

The debt avalanche process involves you making the minimum payments on all of your debts except one. That one remaining debt should be the one that has the highest interest rate on the debt payments. 

So, you should make minimum payments to all of your debts and then use the remaining money you have to make a payment towards the debt with the highest interest rate. 

Using this method will save you the highest amount in terms of interest repayments. This is because the debt with the higher interest rates will get paid off first.

For example, if you have £10,000 credit card debt at 20%, a personal loan of £5,000 at 15% and payments due to student loans of £8,000 at 5%, then according to this process, you’ll make minimum payments to your personal loan and student loan and use the reamining money to pay off your credit card debt. 

Debt Snowball Method

You may be wondering why the debt snowball process even exists when previous method is able to save you money and time in the best way possible. 

The advantage of the debt snowball process is the fact that it helps you build motivation repay your debts effectively. 

The debt snowball process involves you paying off your smallest debts first and leaving the bigger ones for later. 

When you start paying off small debts and start getting them out of the way, it can be quite encouraging and it can help you stay motivated throughout the debt payoff process. 

It’s definitely not easy to get out of debt when you keep throwing money at a creditor but can’t seem to see any progress towards financial freedom. 

Using the debt snowball strategy, you will be able to see near-instant results which will prevent you from becoming discouraged, giving up and choosing bankruptcy

Of course, the former strategy is going to save you more money but if you’re unable to stay motivated, you may miss an important payment or two. This could result in your financial circumstances becoming even worse. 

Not to mention that the debt snowball strategy will also help you improve your credit score. As you slowly start to pay off debt on your credit cards or personal loans using the debt snowball strategy, this will be reflected in your credit report. As a result of this, your credit rating will begin to rise. 


Devising a debt payoff plan to address credit cards and/or personal loan debt can become extremely overwhelming for a lot of people. 

That’s why it’s a good idea to divide your debts and address them using a pre-planned method. I hope the methods I’ve described above will help you get yourself out of debt.


Are you struggling with debt?
Are you struggling with debt?
  • Affordable repayments
  • Reduce pressure from people you owe money to
  • Stop interest and charges from soaring